64 BENJAMIN YU vs.

NLRC, JADE MOUNTAIN PRODUCTS COMPANY LIMITED,

WILLY CO, LEA BENDAL, RHODORA BENDAL, CHIU SHIAN JENG AND CHEN
HO-FU (JUNE 30, 1993 FELICIANO, J.)
Creditors of the dissolved partnership are also creditors of the partnership continuing the
business if continued without liquidation of the partnership affairs

FACTS:
Petitioner Benjamin Yu was formerly the Assistant General Manager (AGM) of Jade
Mountain. Yu was hired by virtue of a Partnership Resolution with a monthly salary of P4,000.00.
However, he actually received only half of his stipulated monthly salary, since he had accepted the
promise of the partners that the balance would be paid when the firm shall have secured additional
operating funds from abroad.
In 1988, the general partners Lea Bendal and Rhodora Bendal sold and transferred their
interests in the partnership to private respondent Willy Co and to one Emmanuel Zapanta. Mr. Yu
Chang, limited partner, also sold and transferred his interest in the partnership to Willy Co. The
partnership now constituted solely of Willy Co and Emmanuel Zapanta. They continued to use the
old firm name of Jade Mountain.
Petitioner was not allowed to work anymore. His unpaid salaries remained unpaid. Yu filed
a complaint for illegal dismissal and recovery of unpaid salaries. The partnership contended that
Yu was never hired as an employee by the present or new partnership.
Labor Arbiter held that petitioner had been illegally dismissed. LA decreed his
reinstatement and awarded him his claim for unpaid salaries, backwages and attorney's fees. NLRC
reversed and held that Yu's claim for unpaid wages should be asserted against the original members
of the preceding partnership.

ISSUES:
1. WON the partnership, which had hired Yu as AGM, had been extinguished and replaced by a
new partnership composed of Willy Co and Emmanuel Zapanta. (YES)
2. WON Yu could assert his rights under his employment contract as against the new partnership.
(YES)

RULING:
1. YES. Under Article 1828, the changes in the membership of the partnership was the dissolution
of the old partnership and the emergence of a new firm composed of Willy Co and Emmanuel
Zapanta. The acquisition of 82% of the partnership interest by new partners, coupled with the
retirement or withdrawal of the partners who had originally owned such 82% interest, was enough
to constitute a new partnership.
However, the dissolution of partnership do not automatically result in the termination of
the legal personality of the old partnership (Article 1829).

2. YES. Under Article 1840, creditors of the old Jade Mountain are also creditors of the new Jade
Mountain, which continued the business of the old one without liquidation of the partnership
affairs. A creditor is entitled to priority vis-a-vis any claim of any retired or previous partner insofar
as such retired partner's interest in the dissolved partnership is concerned. Benjamin Yu is entitled
to enforce his claim for unpaid salaries, as well as other claims relating to his employment with
the previous partnership, against the new Jade Mountain.
 LABOR ISSUE: The non-retention of Yu as AGM did not constitute unlawful termination.
The authorized cause for termination in the case at bar was redundancy. The new partnership had
its own new General Manager, Mr. Willy Co. But the treatment amounts to arbitrary and bad faith
, for which the new Jade Mountain may legitimately be required to pay moral damages.